Open Access
American Research Journal of Business and Management
ISSN (Online): 2379-1047
DOI: 10.46568/arjbm
Impact of Dividends Announcements on Stock Returns Evidence From Karachi Stock Market
Abstract
This study examines the reaction of stock returns in relation to earnings dividend information releases
using data on the Karachi Stock Exchange. Using the event study method, the speed of reaction of the market to
annual earnings information releases for a sample of 114 firms listed on the Karachi Stock Exchange. Significant
abnormal price reactions around earnings announcements suggest the earnings announcements contain value
relevant information. Event window of 41 days, 20 days before and 20 days after the announcement is used.
Event day is represented by (0). Estimation window is used 230 days before the event window. Findings indicate
that changes in stock prices in Pakistan in relation to earnings and dividend announcements is not random, but
follow the pattern, which allows the negative abnormal returns can be earned from trading around earnings and
dividend announcement date. Analyses also concludes that positive and negative earning information disclosure
are unable to influence the stock market efficiency, and therefore cannot fully reflect the changes on the stock
price, investors can get the abnormal returns by using this earning information during whole event window.
Finally, Karachi Stock Market reacts inefficiently on the release of information of earnings and dividends
announcements.
